Federal Judge rules for Fannins in home fire case Suit seeking $13 million is filed in Johnson Court

Posted on Aug 29, 2014 9:59am PDT

PAINTSVILLE—U.S. District Court Judge Amul R. Thapar issued a three-page
Opinion on May 6 that may have far-reaching implications in a lawsuit
filed in the Johnson Circuit Court by Paul and Cheryl Fannin against State
Farm Insurance Company, Mark Anderson and Paul Pelphrey.

The Fannins, in their suit filed on March 7, 2011 by John Kirk, allege
that State Farm Insurance Company would not adequately compensate them
for a fire loss that totally destroyed their home at Van Lear on January
6, 2010 and that State Farm and its agents, Mark Anderson and Paul Pelphrey,
"Breached a Contract of Insurance Protection," "Violated
the Consumer Protection Act," "Breached the Unfair Claims Settlement
Act," "Engaged in Bad Faith" and "Intentionally Inflicted
Emotional Distress" upon them.

The lawsuit demands payment of $3,261,825.00 allegedly owed them under
their policy contract for the loss of their home and furnishings and the
sum of $10 million for punitive damages. Fannins' complaint alleges
that they purchased a policy of fire insurance on their 14,549 square
foot home from State Farm for coverage of $3,261,825.00, the value they
allege was assigned to their home by State Farm's underwriting agent,
but that State Farm will not agree to pay them an adequate amount for
their loss.

Besides the value placed on their home by State Farm's underwriting
agent, the Fannins allege that they submitted appraisal reports from three
commercial builders, all of whom reported that the cost of rebuilding
the home exceeded the coverage amount.

State Farm, in refusing to agree to compensate them for their home loss,
relied upon the report of one person who, according to John Kirk, is not
a builder. "Every person, including State Farm's underwriting
agent, assigned a value to the home of at least the policy amount, except
for a State Farm employee who, as far as we can find out, is not a home
builder. We think that clearly constitutes unfair settlement practices."

State Farm filed a notice with the U.S. District Court at Pikeville to
have the case removed from the Johnson Circuit Court on the grounds that
agents Anderson and Pelphrey were "fraudulently joined" in the
state court action and, because a policy holder can only bring a suit
against the insurance company and not its employees, that the case should
be in federal court and that cases against Anderson and Pelphrey should
be dismissed.

Following briefs to the court by all parties, U.S. District Judge Thapar
concluded in his three-page Order by stating, "Given all this, the
plaintiffs (Paul and Cheryl Fannin) have a 'colorable' argument
that Kentucky law on bad faith claims is on their side."